A week from Wednesday the city council will vote on a zoning deal adjacent to Klyde Warren Park, where the developer wants permission to build a residential tower more than 60 percent higher than the law allows. It’s permission to make 60 percent more money.
Oh, but you know our tough eagle-eyed city staff members aren’t going to give away the company store like that without demanding something back for the taxpayers. Heck no. They are demanding that the developer provide “outdoor seating areas for restaurants to face the park, pedestrian amenities and specific light standard requirements, and enhanced pavement along Woodall Rodgers Freeway.”
Call that the latte tax. You can only go over the existing zoning by almost two-thirds if you agree to provide the public with ample outdoor latte-sipping opportunities.
Me, I like latte. But in addition to latte opportunities, how about some housing opportunities? You know, like living indoors?
Plan Commission member Paul E. Ridley, appointed by District 14 council member Philip Kingston, proposed what he thought was a more serious deal than demanding additional outdoor dining space. After all, by changing the zoning that was on the land when developer Trammell Crow Co. bought it, allowing the company to build to a height of 392-feet high instead of the 240 feet, the city by the casting of a vote will greatly enhance the value of that investment before a shovelful of dirt is turned.
The developer didn't built something in order to hike the value by two-thirds. They just won a council vote.
Ridley wanted Trammell Crow to agree to include a number of “affordable rent” units in their project. The kind of affordable they’re thinking about
would be affordable to people making about $50,000 a year.
But, oh, the horrors! After intense lobbying by real estate interests, the Plan Commission shot down Ridley's idea just before it and the City Council went on summer hiatus. Now they are back, and the Trammell Crow zoning case is before the newly elected city council.
Recently Eric Nicholson told you here about a letter sent to the mayor recently by the Dallas Real Estate Council
, two-thirds of which was dog-whistle language aimed right at Ridley and Kingston, issuing the timeworn threat the development interests always levy whenever anyone does anything but kiss them: It’s our ball, and we’ll take it and go home.
“Changing the rules without sufficient notice,” they said, “will discourage other developers, lenders and investors from developing in Dallas, and they will choose to take their business to other municipalities where they can depend on the predictability of a process.”
How about changing the rules to allow a 60 percent higher building than your neighbor was allowed to put up?
The next piece of timeworn argument, which we will hear repeated at the August 12 council meeting, is that an affordable housing component with guaranteed low rents is not fiscally feasible in high-value areas. But when developers make that argument in broad generalities, they either don’t know what they’re talking about (affordable housing is often not their area of expertise) or they do know and they are obfuscating on purpose.
I am looking at a recent appraisal report by one of the nation’s top 10 land valuation and assessment consultants for a project of several hundred apartment units in a major Texas city. The firm looked at what the project would be worth and how much income it would produce for investors with and without affordable housing units.
The amount and kind of affordable they’re talking about is way more affordable and way more units than anything anybody has proposed for the Trammell Crow/Klyde Warren deal — 20 percent of the project would be held at rents affordable for much poorer people.
Without any affordable units at all, the project will produce a net operating income of $11.33 a year per square foot. With a fifth of the building set at rates affordable by low-income persons, the project will produce net income of $11.21 a square foot.
A difference of 12 cents.
How can that be? In this analysis, the difference was mainly in the taxes. If a project includes housing that meets federal standards for affordability, taxing entities are required by law to value those units according to the income they will produce, not what it cost to build them or what they might sell for if the whole project were sold.
In the project I’m looking at, the presence of the affordable units would chop the overall real estate taxes by 40 percent, which would reduce total fixed expenses by 36 percent. The same analysis finds that the presence of the affordable units reduces the asset value of the whole project by between 1 and 3 percent.
When the City Council lets Trammell Crow go up two-thirds higher than the neighbors, they will be allowing the company to make much more money on their deal. They will be enabling the creation of an asset worth much more than it could have been without the vote of the council.
So is it really terrible and draconian of the council to ask for 1 percent of that back? The city has an interest in promoting income diversity and not allowing downtown to become the exclusive regime of the super-wealthy. Is it fiendish of them to ask for a 1 percent sacrifice in asset value in exchange for the enormous bonanza provided by their vote? Is it not just goofy — embarrassing and stupid — to ask for more latte space and not demand something real like affordable housing?
I'm not arguing that this one analysis of one project applies the same way to all projects. But I am saying this: When developers make broad-brush arguments — and especially when they use dog-whistle arguments about "mixing" — then the city's elected leaders have an obligation to scratch a little deeper and take a closer look.
This kind of give-and-take, in which zoning authorities demand amenities in return for extra zoning, is in place in cities all over the country, where measures like these are viewed as a much more palatable mechanism for achieving integration and diversity than point-of-a-gun lawsuits making people do stuff they don’t want to do.
The Ridley/Kingston formula is that nobody has to do any of this if they don’t want to. But if they don’t, maybe they won’t come out quite as sweet on their zoning deal. This is about negotiation, not compulsory enforcement. It’s about the city stiffening its back and sticking up for the interests of the community.
When this comes before the newly elected city council on the 12th, we will see exactly what kind of council we’ve got and who is who on it. I’m afraid to watch.